What does it take to change a large company’s culture according to serial founder Auren Hoffman?
It is extremely hard to change a large company’s culture for the better. (It is relatively easy to change the culture for worse). So first, let’s assume you are trying to change a company’s culture for the better.
Given that, you first need to assess the current company’s culture. There are two vectors to assess:
1. Do the employees have high expectations of themselves?
2. Do the employees have high expectations of the other employees?
If the answer to both questions is “yes,” then you likely have a great culture already and it just needs some tweaking. It is a High Performance culture. This is the ideal state and pretty much every high-performance company (whether large or small) in history fits in this category.
If the answer to both questions is “no,” then you might as well not even try. The company is a lost cause and will eventually become a discarded fossil. Unfortunately, even some of the best companies can evolve to this state over time. If you find yourself working for one of these companies, find a new job immediately.
The harder discussion is what happens if your company answers “yes” to one question and “no” to another. Let’s explore this.
The Hero Syndrome
If the culture is defined by employees having high expectations of themselves but low expectations of their colleagues (“yes” to #1 and “no” to #2), then you have a culture of hero syndrome. It means that many people feel it is their duty to carry the team. It also means there is a lack of trust that others in company will do a great job. It causes the high performers to work longer and longer hours to carry everyone else. And it means that there way too many low performers in the company because there are little consequences for free-riding.
In the Hero Syndrome scenario, you have the ability to change the culture to become a high performance culture (getting to “yes” answers to both questions). It is extremely hard work and most companies fail to make the transition, but it is possible. The main thing you need to do is upgrade your team and promote trust. Here are the things you need to do to make the changes:
1. Upgrade your executives.
Most CEOs are afraid to upgrade their executives because they are worried (1) about how the rest of the organization will feel if “Bob” leaves; (2) worried about how the street or investors will think; or (3) worried that if Bob leaves before his replacement starts, the CEO will have to jump in and do the work.
If Bob is an executive and is not a high-performer, he is a cancer in the organization. You cannot upgrade your talent without starting at the top.
Of course, this assumes that you (the CEO) is a high-performer. If you are not, there is no chance for transition.
2. Lay off the low-performing people.
This is obvious but so many companies forget this step. And when you lay off the low performers, you need to signal to everyone else in the company that you laid these people off BECAUSE they are low performers. Too often when companies do lay-offs, they tell a story that people were “redundant,” or they are making cuts in a division. Or it was “market forces.” And while this explanation makes the people being laid off feel better, it makes the people remaining at your company feel insecure. A high performing person could interpret the layoff to think that their job could be at risk if market forces change. So simply, when you lay off low-performers, communicate to everyone in your organization that you laid them off BECAUSE they were low performers.
Never, ever, lay off a high performer [*and high-values match]. If the employee is awesome and their job becomes “redundant,” move that person somewhere else in the organization (even if the move ruffles feathers). Once you identify a superstar, do everything to make sure they continue to work in your company.
3. Change your internal policies to promote trust.
You cannot move to “yes” on questions #2 if people in your organization do not trust each other. You need to do everything that promotes trust. Some ways to promote trust:
Moving your HR, IT, and reimbursement policies to mimic the “Netflix HR Model” — see Reed Hasting’s slides on the Netflix Culture.
Let people know that you trust them by stopping to micro-manage them. The only reason to micro-manage someone is because you do not have full faith in them. If you find yourself micro-managing someone, you need to take a step back and think about if you have the right person.
Decentralize as many decisions in your organization as possible. This is especially true in IT — empower the people using a software product to buy the software product directly (and not be dictated by IT).
Eliminate necessary meetings and reporting that have been put in place because trust is low.
The good news is, you CAN move from the Hero Syndrome to a High Performance culture … but it is just really hard.
Do you prefer an arrogant high performer or a mediocre but high values match employee?
The obvious best employee is someone that is high performance AND high values match. If someone is low performance AND low values match, you have an easy decision — you give the person a severance package.
The hard question is what to do with the other two boxes:
* High Performance and Low Values
* Low Performance and High Values
This is a very hard decision.
Jack Welch, the former CEO of GE, believes that companies should fire people that are “High Performance and Low Values” and invest in people that are “Low Performance and High Values”.
That seems to make sense at a large company like GE. The low-values people hurt morale and drive high performers out of the company. The high-values people are worth investing in given that GE has an extraordinary training department and great management talent.
CEOs of start-ups, might come to a different conclusion that Jack Welch. “High Performance and Low Values” people have no business being at a start-up either because their low values could create a situation where your other top performers (that are also high values) leave because they do not align with the low-values high-performers.
In start-ups, however, it is harder to deal with the “Low Performance and High Values” people. They obviously grow the culture and people in the company tend to benefit from their presence (at least culturally). But start-ups often have limited management bench, limited management time, and limited (if any at all) training. So usually the better strategy than to fully invest in these people is to move them to a different job or a different manager. It is possible that they might just be in the wrong place and a different org might turn them into a high performer (I have seen it happen many times). Of course, if moving them does not help their performance, then you will have to give them a severance package as well (this is usually the hardest thing a CEO does).
In the end, most great start-ups are left only with people that are BOTH high performers AND high values. But while it means the start-ups have a much smaller pool of people to recruit, it is ok because they generally need so few people.
What are the pillars of a powerful culture within a startup?
Culture is defined how your company is different from others … not how you are the same. So you really need to think of how you are different from other places. One test: what percentage of people who understand your culture will say “this place is NOT for me”? That percentage should be above 20% to have a culture worth having … otherwise you are trying to appeal to everyone (which means few will be REALLY excited).
A big mistake many companies make is trying to create an environment that appeals to everyone. Your culture only needs to appeal to a very small percentage of people for you to be successful.
For instance, Zappos practices. That is something that appeals to only a small minority of people … but the people who it appeals to absolutely love it. Zappos is a good example of a company that has a strong culture — but not because lots of people want to work there. Zappos has a strong culture precisely because the people that want to work there love it, and tons of other people (maybe the vast majority of workers) would never want work there. That’s the type of culture you want at your company — one that strongly appeals just a few people.
Paul Graham’s famous quote about product “better to make a few users love you than a lot ambivalent” is also true about culture.